CONCORD

City wins church tax fight

State justices okay inspecting spaces

The city didn't violate state law or the Constitution when it began taxing a Pentecostal church after officials determined parts of the church's sprawling building on Mountain Road weren't being used for a religious purpose, the state's high court ruled yesterday.

The unanimous Supreme Court decision affirmed an earlier ruling by the New Hampshire Board of Tax and Land Appeals that a 2008 tax bill sent to Liberty Assembly of God - renamed Destiny Christian Church in 2010 - was legitimate.

"We're pleased with the outcome," said City Solicitor James Kennedy. "This case is helpful for the city in . . . our interpretation of the religious exemption in state law."

Lisa Biron, one of the church's lawyers, called yesterday's ruling "just a devastating loss for the church." She said the church's attorneys were discussing what to do next, including a possible appeal to federal court.

The church's 2008 tax bill was already paid "under protest," Biron said, and the church has appealed tax bills from 2009 and 2010 to the Merrimack County Superior Court. Those cases had been on hold until the 2008 case was decided.

Biron said the church doesn't have enough money to pay the taxes owed for 2009 and the city could seize the 26.1-acre property at 339 Mountain Road. But she said Concord officials have told the church they won't take any action until the 2009 case works its way through the legal system.

"They assure us they won't actually take it until litigation is over," Biron said.

Last August, the church put its building and land up for sale with an asking price of $650,000. Biron said the church is still on the market.

The congregation has occupied the two-story building, a former bull farm and later a school and dormitory, since 1994. Until 2008, it didn't pay any property taxes.

That year, though, city assessors inspected the property and determined 60 percent of the church building wasn't being used for religious purposes and so wasn't eligible for a tax exemption. That figure was later revised to 40 percent.

The city did grant a tax exemption for the church's sanctuary, prayer room and other spaces, but decided to tax other rooms, including vacant apartments, a second-floor men's restroom and storage rooms.

The church appealed the bill to the state tax appeals board, losing there in 2011, and then to the high court. Its lawyers argued that the entire church was eligible for a tax exemption as a house of worship and that the city wasn't empowered to decide, room by room, which parts of a church were and were not religious.

"Our argument . . . is that this opens up a can of constitutional worms if you allow the city to go into a house of public worship," Biron said Feb. 9 during arguments before the Supreme Court.

But city officials maintained they were well within their rights to decide the extent to which a property qualifies for an exemption from property taxes on religious grounds.

And the Supreme Court sided with the city in yesterday's 4-0 decision, written by Associate Justice Carol Ann Conboy.

State law, Conboy wrote, "does not support Assembly's argument that a church's assertion that a building constitutes a 'house of public worship' is sufficient to place it beyond investigation. The statute provides that the city must determine whether a building owned by a religious entity is entitled to exemption because it is 'used and occupied' directly for a religious purpose - an interpretation that our precedent . . . supports."

Conboy also rejected the church's arguments that the city went too far in its room-by-room determination of religious use and that the spaces were, in any case, being used for a religious purpose.

Biron yesterday reasserted the church's position that the city violated the Constitution'sFirst Amendment protection of freedom of religion.

"For a taxing authority to tax an upstairs bathroom in a church, . . . it is just such a violation of constitutional rights of this church for them to go in and determine that that's not a religious use," she said. "So we're looking at federal court, and we're going to discuss where we go from here."

(Ben Leubsdorf can be reached at 369-3307 or bleubsdorf@cmonitor.com or on Twitter @BenLeubsdorf.)